12. SUBSEQUENT EVENT

 

The Company and a group of lenders entered into a Note Purchase and Security Agreement dated as of July 29, 2014 providing for borrowing by the Company of up to an aggregate of $1,000,000 upon the issuance of the Company’s secured promissory notes (the “Notes”) bearing interest of 8% per annum and having a stated maturity of 60 days from issuance or the earlier closing of an equity financing with gross proceeds to the Company of $1,000,000. The Notes are secured by a lien on substantially all assets of the Company, now existing or subsequently acquired. The Company borrowed an aggregate of $617,500 at an initial closing on July 29, 2014. Any borrowing of the remaining $382,500 balance of the $1,000,000 is at the option of the lenders. In connection with the entry into the Note Purchase and Security Agreement, the Company obtained the consent of the holders of its outstanding convertible debentures in exchange for the extension of the security interest on all such assets of the Company to the convertible debentures, pari passu with the Notes.